Abandonment Giving up on the proprietary rights in insured property to the underwriter in exchange for payment of a constructive total loss.

Actual Total Loss

This occurs when:

• The insured property is completely destroyed; or


• The insured is irretrievably deprived of the insured property; or


• Cargo changes in character so that it is no longer the thing that was insured (e.g., cement becomes concrete); or


• A ship is posted "missing" at Lloyd's, in which case both the ship and its cargo are deemed to be an actual total loss.

Ad Valorem Bill of Lading

Same as Valued Bill of Lading

Advance

An agreed percentage increase applied to the total of invoice plus freight, for unknown expenses at the time of shipment, and also for a portion of the insured's profit.

Advance Freight

Same as Prepared Freight.

Adventure

The exposure of property to risk at sea.

Affreightment

A contract which sets forth the obligations of both shipper and carrier concerning transportation of the merchandise. The most common forms of affreightment are Bills of Lading and Waybills.

All Risks

All fortuitous causes of loss. It does not embrace inevitable loss such as wear and tear.

Air Waybill

A bill of lading issued by an airline acknowledging receipt of merchandise and indicating conditions for carriage.

Annual Policy

Designed for clients with a small turnover of Goods in Transit. A deposit premium is paid and this is adjusted at the end of the year based on declarations made.

Application

A written form submitted to underwriter to obtain quotation for a risk, and contains particulars of the risk.

Approved or H/C

An "approved" vessel is one which the underwriters deem adequate to carry the insured cargo, at the agreed rate of premium. Where the vessel is not approved, the risk is still covered but subject to a reasonable additional premium.

Assignment

The passing of beneficial rights from one party to another.

Average

Partial loss or damage.

Average Adjuster

Appointed by shipowner to prepare General Average Statement.

Average Clause

The clause in marine policy which sets out the coverage provided in the event of partial loss.

Average Irrespective of Percentage

Indicates that partial losses will be paid regardless of any franchise or percentage.

Avoidance

The right of an underwriter, in the event of a breach of good faith or delay in commencement of an insured voyage to step aside from the insurance contract and to treat it as though they had never accepted the risk.

Barratry

A criminal or wrongful act by the ship's master or crew causing loss or damage to the ship or cargo.

Benefit of Insurance Clause

A clause by which the bailee of goods claims the benefit of any insurance policy affected by the cargo owner on the goods in care of the bailee. Such a clause in a contract of carriage issued in accordance with the Carriage of Goods by Water Act is void at law.

Bill of Lading

The most common form of affreightment which serves three purposes: the contract of carriage between the shipowner and shipper, outlining the liability of carrier, it is also the shipowner's receipt for the goods and the document of title to them; (i.e., as a negotiable document, interest can be as signed to a third party.

Bonded Shipments

Shipments on which duty is payable, but which are permitted to travel to inland destinations before customs inspection is made and duty is actually paid.

Bottom Limit

The maximum value at risk per shipment/sending/aircraft.

Carriage of Goods by Sea Act (COGSA) (USA) and Carriage of Goods by Water Act (COGWA) (Canada)

International agreement defining the responsibilities and liabilities of an ocean carrier transporting cargo.

Certificate of Insurance

A document presented by the insurance company or insured as evidence that insurance is in effect. The insured may assign his rights under negotiable document to a third party, usually consignee, by endorsing the reverse of the certificate.

Charter Party

The contract evidencing the agreement of a shipowner to lease his vessel to another person or firm.

C and F (CNR)

Cost and Freight, a sale term under which the consignee makes its own insurance arrangements for the goods throughout the period of transit.

Clean Bill of Lading

A bill of lading on which the carrier has made no indication of any problems with the condition of the cargo at the time of acceptance for carriage.

Co-Insurance

Where two or more parties share the same risk. A co-insurer is not obliged to follow the decision of another co-insurer, except where they have given authority for the other party to act on their behalf. Each co-insurance is a separate contract with the insured.

Collect Freight

Freight which is payable to the carrier when the merchandise arrives at the port of discharge named in the bill of lading.

Collision

Physical impact between two or more ships or vessels used for navigation. In collision liability insurance, the term does not include contact of the insured vessel with anything other than a ship or vessel.

Compromised Total Loss

An arranged settlement on a hull policy where there is no claim for actual or constructive total loss, but where it is impractical to repair the vessel.

Commercial Invoice

A document issued by the seller to the buyer, which gives detail of merchandise sold, number of units being shipped, per unit cost and the terms of sale.

Common Carrier

Any shipowner or other carrier who offers his vessel or other mode of transportation to the public for the purpose of transporting merchandise.

Consignee

Person or firm to whom cargo is shipped.

Constructive Total Loss

The position exists when the cost of repairing or recovering lost or damaged property plus the value of the salvage would exceed the property's value when repaired or recovered.

Contingency Insurance (Seller's Insurance)

A secondary insurance coverage which will protect an insured's financial interest if the primary insurance coverage affected by others does not respond for a covered loss.

Contribution

This relates to situations where more than one party covers the risk. Each party is deemed to be liable for its portion of the loss. If the insured has recovered in full from one insurer, that insurer is entitled to recover from the other insurer that part of the loss which should have been paid by the latter. The term, as used in marine insurance, also applies to contributions paid by the insured in connection with salvage and/or General Average.

Contributory Value

The value of property saved as a result of a General Average Act which forms the basis for determining each party's contribution in General Average.

Count Bill of Lading

A bill of lading which shows the actual number of units being shipped.

Country Damage

Damage caused by dirt, mud, etc., to commodities before they are shipped.

Cover Note

A non-negotiable document evidencing insurance which may or may not indicate the terms of coverage.

Customs Broker

A firm which specializes in clearing imported merchandise for transit to the interior. Normally responsible for obtaining and submitting all documents for clearing merchandise through customs and arranging inland transport as well as paying all charges related to these functions.

Customs Entry Form

A form required by Canada Customs for all merchandise entering Canada. It indicates country of origin, description of merchandise and amount of estimated duty to be paid before merchandise is released by customs.

Declaration

Form used by insured in reporting shipments under an Open Cargo Policy when no evidence of insurance is required.

Deductible

A specific dollar amount, or percentage of the insured value, which will be deducted from all losses recoverable under a policy.

Direct or Held Covered

A condition which requires the insured voyage to be direct from one place to another. If the voyage is delayed en route or if there is deviation from the direct route, the insurance coverage continues subject to payment of an additional premium, but only if the insured gives prompt notice of the delay or deviation immediately on receipt of advices, unless the policy provides otherwise.

Disclosure

The duty of the insured and his broker to tell the underwriter every material circumstance before acceptance of the risk.

Dock Receipt

A form issued by a carrier or his representative as evidence that merchandise was in fact received by the carrier for shipment. Often referred to as a Received for Shipment Bill of Lading.

Door-to-Door

Refers to merchandise shipped in containers, trailers or vans from the original point of manufacture to the final destination. Same as House-to-House.

Earned Premium

This applies when insurance is terminated before the expiry of the insured period. The earned premium is the premium attaching to the period during which the underwriters have been on risk.

Excess Liabilities

Insurance to cover the excess amount of liability for general average contributions, salvage charges, sue and labour charges and three-fourths collision liability where the full amount is not covered by a hull policy.

Free of Particular Average, American Conditions (FPAAC)

Average clause which limits recovery of partial losses to those caused by fire, stranding, sinking or collision.

Free of Particular Average, English Conditions (FPAEC)

Same as FPAAC except that the partial losses referred to are recoverable if the vessel has stranded, sunk, burned, been on fire or in collision, regardless of whether such losses were actually caused by any of these perils.

Franchise

Like a deductible, but if the amount of the merchandise is met or exceeded, the loss is paid in full.

Free on Board (FOB)

Goods sold under such terms are at charge and risk of the seller until on board shipping vessel (other terms include "Free Alongside Steamer," "Free on Rail," etc.)

Freight Forwarder

Firm specializing in arranging transport of merchandise and completing documentation required for the orderly transport of merchandise. Occasionally, they will take merchandise for the purpose of packing or consolidating with other cargo for export to the same country.

Full Value Declared (FVD)

A notation on an air waybill which indicates that a specific value has been declared to the carrier for carriage of the merchandise.

General Average

Loss arising through a voluntary sacrifice of any part of the ship or cargo, or an expenditure, to safeguard the ship and the rest of the cargo.

General Average Contribution

Such losses or expenditures are contributed to by all the interest at risk on the basis of their respective values.

General Average Bond

Document required of cargo owners, after a GA loss, obtaining their agreement to pay any contribution the may become due.

(General) Average Guarantee

Given by cargo underwriters, after a GA, agreeing to meet their insured's liability for contribution.

Guaranteed Freight

Freight which is not prepaid but which is payable whether or not the merchandise arrives at the final point of destination.

Held Coverage

A provisional acceptance of risk, subject to confirmation that cover is needed at a later date. Where applicable to an existing insurance, coverage is conditional, in practice, on prompt advice to the underwriter as soon as the insured is aware of the circumstances to be held covered coming into effect, and a reasonable additional premium is payable if the risk held covered comes into effect.

House Air Waybill

An air waybill issued by a freight forwarder for an air shipment.

House-to-House

See Door-to-Door.

ICC

Institute Cargo Clauses. There are three basic sets of these clauses (A, B and C). The (A) clauses cover all risks, subject to specified exclusions. The (B) and (C) clauses cover specified risks, subject to specified exclusions.

Inherent Vice

A property in cargo which causes, or is liable to cause, loss or damage to the cargo, without any accident occurring (e.g., spontaneous combustion). It is always excluded by the insurers of the cargo because of its inevitable nature.

Insurable Interest

It is illegal for anyone to insure without an insurable interest or, in the case of marine insurance, a reasonable expectation of acquiring such interest. In general one has such interest when one's relationship to property at risk may expose one to loss or liability where one stands to gain by the safety of the property.

Jettison

Throwing the cargo or ship's property overboard to save other property from a common danger.

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Letter of Credit

Method of payment between buyer and seller. The buyer opens a Letter of Credit in favour of the seller at his local bank by depositing the amount of the purchase price and dictating certain documents which the seller must present in order to obtain a payment. The Letter of Credit will be sent to a bank in the vicinity of the seller and upon presentation of the documents called for, the local bank will release payment.

Master Air Waybill

An air waybill issued by the originating airline when more than one airline is involved with a shipment, or when a freight forwarder issues a house air waybill.

Material Circumstance

Any circumstances which would influence the judgment of a prudent underwriter in determining whether to accept a risk and the amount of premium to charge.

Material Representation

A statement made to the underwriter before acceptance of risk which is material to the decision in accepting and rating the risk.

No Value Declared (NVD)

A notation on air waybill which indicates that no specific value has been declared to the carrier for carriage of the merchandise. Liability of the carrier would therefore be as defined by statute or as incorporated in the waybill. Same as Released Bill.

Non-Delivery

Disappearance of an entire shipping package rather than the contents themselves or a portion of the contents.

Non-Disclosure

The failure of the insured or their broker to disclose a material circumstance to the underwriter before acceptance of the risk. A breach of good faith.

Non-Vessel Operating Common Carrier (NVOCC)

A firm that offers the same services as an ocean carrier. They usually consolidate several small shipments into full containers and arrange transportation by ocean common carriers. They are subject to the same laws and statutes as apply to a primary common carrier.

Normal Course of Transit

The orderly transit of merchandise from the point of origin to the final destination without interruptions or delays resulting from the action or inaction of any party at interest.

Notice of Abandonment

A condition which must precede a constructive total loss. If the insured fails to give notice to the underwriter, the loss can be treated only as a partial loss unless an actual total loss is proven. An underwriter who accepts notice admits liability for the loss. Notice is not necessary where it would not benefit the underwriter, where the underwriter waives the obligation or in the case of a re-insurance provided the policy incorporates the "waiver" clause, action taken by an underwriter to prevent or reduce the loss is not deemed to be an acceptance of abandonment.

On Board Bill of Lading

A bill of lading confirming the receipt of merchandise and the fact that it was loaded on board the ocean vessel.

On Deck Bill of Lading

A bill of lading which states that the cargo has been stowed on deck and is at the shipper's risk. The carrier is not liable for loss or damage unless due to gross negligence.

Open Cargo Policy

These are for those clients who have a regular turnover of Goods in Transit. The contract will cover all sendings which come within the scope of the insurance. Premiums are debited monthly or quarterly.

Optional Stowage Bill of Lading

A bill of lading which gives the carrier the right to stow cargo wherever he sees fit, especially with respect to the stowage of containers on deck.

Overage Additional Premium

All additional premiums charged on an open cover declaration where the carrying vessel is outside the scope of the classification clause. It may be applied, also, to additional premium charged for breach of navigational warranties (e.g., institute warranties) where the ship is more than 15 years old.

Particular Average

A particular loss caused by marine perils, other than a General Average loss.

Perils of the Sea

Hazards arising on navigable waters through natural forces such as abnormally heavy seas, high winds, etc.

Pilferage

Theft of the contents, in whole or in part, of a shipping package.

Prepaid Freight

Freight paid by the shipper to the carrier when the merchandise is accepted for shipment. Not refundable even if the merchandise does not arrive at the intended destination.

Proximate Cause

The most direct cause of loss, that is, the most effective, but not necessarily the last, in a series of events.

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Received for Shipment Bill of Lading

A bill of lading issued by the carrier evidencing actual receipt of merchandise for shipment. Also referred to as a Dock Receipt.

Recovery

The amount recovered from a third party responsible for a loss on which a claim has been paid.

Released Bill of Lading

Type of affreightment where no specific value has been declared for carriage. (See No Value Declared).

Representation

A statement of fact made by the insured or their broker when negotiating insurance with the underwriter.

Sacrifice

The deliberate casting away or destruction of property to prevent greater loss. General Average sacrifice is for the common good and saved interests make good the sacrifice in proportion to the saving enjoyed.

Seaworthiness

There is an implied warranty in every voyage policy that the ship must be seaworthy at the commencement of the insured voyage or, if the voyage is carried out in stages, at the commencement of each stage of the voyage. To be seaworthy, the ship must be reasonably fit in all respects to encounter the ordinary perils of the contemplated voyage, properly crewed, fuelled and provisioned, and with all her equipment in proper working order. Cargo policies waive breach of the warranty except where the insured or their servants are privy to the unseaworthiness. Breach of the warranty is not excused in a hull voyage policy, literal compliance therewith being required. Although there is no warranty of seaworthiness in a hull time policy, claims arising from unseaworthiness may be prejudiced if the ship sails in an unseaworthy condition with the knowledge of the insured.

Settling Agent

An underwriter's representative who is authorized to settle claims.

Short Form Bill of Lading

A summary-type bill of lading which does not incorporate all obligations and responsibilities of both parties. Unless a shipper is familiar with the carrier's tariff, he should request a full bill of lading.

Salvage Charges

The reward payable to salvors for saving life and property at sea.

Single Transit Policy

"One Off" insurance for those clients who require transit cover on an infrequent basis.

Straight Bill of Lading

A bill of lading naming a specific party as the consignee. It is non-negotiable and only the named party can take delivery of the cargo.

Strikes Cover

Limited to damage caused to insured property by strikers, locked-out workers and persons involved in a labour dispute. Does not include loss or expense incurred as a result of strikes.

Subrogation

The right of the underwriter to step into the shoes of the insured, following payment of a claim, to recover the payment from a third party responsible for the loss. Subrogation is limited to the amount paid on the policy.

Sue and Labour Charges

Charges incurred by an insured in averting or diminishing a loss. They are recoverable in addition to the full sum insured.

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Utmost Good Faith

A basic principle of insurance. Mutual Trust in negotiating an insurance contract. The insured and their broker must disclose and truly represent every material circumstance to the underwriter before acceptance of the risk. A breach of good faith entitles the underwriter to avoid contract.

Valued Bill of Lading

A bill of lading issued by the carrier which indicates the amount which the shipper had declared as the value of the merchandise. The carrier will be liable for this amount in the event he is found responsible for loss or damage to the merchandise.

Voidable Policy

Where the underwriter has the right to avoid a policy (e.g., in the event of a breach of good faith), the policy is termed "voidable."

Warsaw Convention

Defines the responsibilities and liabilities of air carriers transporting merchandise in international trade.

Waybill

A bill of lading issued by a carrier showing the merchandise to be transported and shipping instructions. It is usually used by airlines and truckers.

Without Prejudice

The claim is paid on this occasion, although the underwriter feels it does not attach to the policy, but this action must not be treated as a precedent for future similar claims.

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York/Antwerp Rules

An international code governing General Average.

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